Browsing by Author "Wenje, Peter Okoth"

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    Effect of Infrastructure Development on Domestic Private Investment and Foreign Direct Investment in Kenya
    (Kenyatta University, 2025-03) Wenje, Peter Okoth
    Kenya has prioritized infrastructure development since independence. This is evidenced in the seasonal paper number 10 of 1965, various economic development policies of the 1970s, National development policies in the 1980s, Medium-term plans of 2008 to the present term, as well as the vision 2030. All these economic planning strategies aim to provide an excellent environment for infrastructure development in the country to facilitate industrialization and make Kenya an attractive market economy. Availability of quality infrastructure boosts economic productivity, the cost of production, improves the quality of life, boosts domestic private investment (DPI), attracts foreign direct investment (FDI), and helps modernize the country. There is an evident effect of infrastructure development on DPI and FDI, as seen by the empirical literature. However, no study has analyzed whether the growth in infrastructure development is the reason for the structural change in FDI inflow and DPI development in Kenya. FDI and DPI in Kenya had a more or less uniform in trend from 1970 to 2006, to a significantly steeper upward trend from 2007 to 2021. This means that there is an observed structural change in both FDI and DPI. Logistic regression was applied in the study to explain the shift in the mean values from the low mean observed in 1970-2006 to a higher mean observed in 2007-2021, making this study different from any other study carried out on the subject. The first objective of the study was to analyze the effect of infrastructure development on FDI while the second objective was to examine the effect of infrastructure development on DPI in Kenya. Flexible accelerator theory on investment was the central theory of the study. From the results of the study, Information and Communication Technologies (ICT) infrastructure had a positive and significant effect on both FDI and DPI at 5 per cent level of significance. Energy infrastructure had a positive and significant effect on FDI but for DPI, it had insignificant effect. Transport infrastructure had a positive and significant effect on DPI but it had insignificant effect on FDI inflow in Kenya. GDP growth rate, inflation rate and exchange rate were used as the control variables in the study and they were not statistically significant in increasing both FDI and DPI at 5 per cent level of significance. Based on these findings the government should prioritize ICT development since it has a ripple effect on the FDI inflow as well as DPI development. Investing in cyber security measures and cloud networking will give investors confidence in the security of their data hence the urge to invest. Foreign investors prioritize energy generation capacity in the host country. Therefore, the government should prioritize expanding greater and efficient energy supply to attract more investors. Domestic investors on the other hand relies on transport infrastructure. Therefore, the government should see on how to reduce road congestions, port clearance bureaucracies as well as freight charges to boost more investment. The study therefore conclude that greater and efficient ICT infrastructure, Transport Infrastructure and Energy infrastructure are prerequisites for higher investment in the country